Will a Tax Exemption for COVID-19 Treatment Be Appreciated?

However, the claim settlement record of these COVID-specific policies has been quite disheartening. It appears that the potential spread of pandemic was grossly undermined at the time of fixing policy premiums and issuing COVID-19 specific policies by insurers. It has also demonstrated how policyholders can suffer financially as a result.

As you may know, the out-of-pocket expenses have been high to treat COVID-19. As per a Business Today report, insurance companies have settled around 50% of the total claims received under COVID-specific policies during the second wave. Besides, some insurers displayed an unwillingness to renew these policies and went against the insurance regulator's diktat of renewing these policies until September 30, 2021.

Moreover, numerous instances of insurance companies not permitting cashless facilities, despite their customers being eligible for it, have eventually forced many policyholders to opt for the reimbursement route and shell out huge sums from their pocket initially.

That's not all. Certain claims for COVID-19 treatment have been rejected on the pretext that the hospitalisation was for mild symptoms, non-disclosure of pre-existing diseases, comorbidities, extravagant charges imposed by private hospitals, etc. And insurers who have accepted and settled claims, have been done so at far lower amounts than those that were claimed on an average.

The difference between the indicative tariff rates prescribed by the General Insurance Council of India in July 2020 and the actual expenses incurred by the patients/policyholders for the treatment has made a big dent in the wallet of the common man.

Against this backdrop, the government has decided to apply a pain-relief balm. But only a few will benefit from the government's gesture of goodwill.

Not all have suffered financially. Some fortunate citizens working with responsible and considerate employers got partial or complete reimbursement of expenses they had incurred for COVID-19 treatment.

As per the circular of the Ministry of Finance dated June 25, 2021, financial help received by a taxpayer from employer/friends/relatives or any other person for the treatment of COVID-19 during FY 2019-20 and subsequent years will be tax-exempt.

Moreover, the ex-gratia compensation received by the family members of a taxpayer who lost his/her life due to COVID-19 will also be tax-exempt in FY 2019-20 as well as in the subsequent years. When such an amount is received from the employer of a deceased person, no upper limit is applicable. But when received from any other person, the upper limit of Rs 10 lakh will apply on an aggregate basis.

It's noteworthy that the circular is silent about the out-of-pocket expenses. This may appease some taxpayers who are likely to treat these exemptions as a gesture of goodwill by the government.

Apart from this, the government has also extended the deadlines to meet numerous tax and other compliances.

What are possible reasons for granting a tax exemption and extending timelines for tax compliances?

The government has come under heavy criticism for its vaccination policy and overall handling of the pandemic situation. The exemptions and extension in the timeline for tax compliances could help the government assuage some of the pain, and these are intended to improve its public image ahead of state elections next year and set the stage ready for Lok Sabha elections in May 2024. Thus, the underlying tone of appeasing the electorates is very much evident and perhaps rightly timed.

Having said that, citizens and taxpayers shouldn't treat these measures as substitutes for prudent financial and tax planning.

Although the government has offered some relief to those receiving help from their employers, friends, family members, and/or any other person/s, you can't always rely on such sources for a long time. What if you lose your job and your future employer isn't as considerate enough to lend you the required support?

Hence, buy a health insurance policy with an adequate sum insured when you are young and do not undermine the inflation in healthcare. If you develop some chronic ailments such as diabetes in future, getting adequate insurance cover at an affordable price may become difficult. Also, with mucormycosis or black fungus infections on the rise amidst the pandemic, holding an adequate health insurance cover is imperative.

Considering this, I urge you all to have comprehensive health insurance coverage to safeguard yourself from potential financial losses. To select an appropriate health insurance policy and cover, evaluate the following aspects:

• ✓ Your current personal health

• ✓ Your family's medical history

• ✓ Your pre-existing diseases, if any

• ✓ The state and city you reside (to assess the healthcare facilities and cost)

• ✓ The network of hospitals that have a tie-up with the health insurer

• ✓ If a cashless hospitalisation facility is available

• ✓ The coverage for pre-existing diseases

• ✓ The coverage for pre and post hospitalisation expenses

• ✓ If day-care procedures are covered

• ✓ Exclusions from the policy coverage

• ✓ Whether medical expenses arising out of a pandemic, war, riots, terrorist attack are covered

• ✓ Sub-limits on room rent (Ideally, buy a health insurance policy that doesn't have sub-limits on permitted expenses. Such policies may charge you higher premiums but they are worth buying.)

• ✓ Is there is co-pay clause (A clause in health insurance plans that requires cost-sharing by the policyholder. Opt for a health policy with the least co-pay clause.)

• ✓ How much would be the No Claim Bonus

• ✓ How much is the annual Premium against the features of the policy

• ✓ Claim settlement ratio of the health insurer

And finally, read all the terms & conditions carefully before signing on the dotted lines when you buy the health insurance policy.

Otherwise, any health insurance kavach (protection) could be just namesake and prove too brittle to rely on.

Warm Regards,
Rounaq Neroy
Editor, Daily Wealth Letter

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